Trump Weighs Diesel Export Ban as Iowa Farmers Feel Fuel Pinch

President Donald Trump said Sunday the White House is still considering a diesel export ban as U.S. fuel prices hover near record highs, a move that could have major implications for Iowa farmers and rural communities already struggling with soaring costs.

Speaking to a Fox News reporter at the Presidents Cup golf tournament in Illinois, Trump said the administration is looking at the measure very seriously.

That can oftentimes lead to a little bit of an increase on gasoline for cars, so we're looking at it very seriously. We may do it, Trump said.

Average U.S. diesel prices hovered around $6.50 a gallon on Friday, according to AAA, up sharply from a year ago and just below the record high of $6.53 set on Sept. 22.

Why Iowa Farmers Care About Diesel Prices

Soaring diesel costs have put additional financial strain on Iowa farmers and agricultural workers, who depend on the fuel for planting, harvesting, and transporting crops. The timing could not be worse, with the November midterm elections approaching and rural voters feeling the squeeze at every turn.

Beyond the fuel pump, farmers are facing higher costs across the board, from fertilizer to equipment, making the diesel debate a pocketbook issue for Iowa's agricultural economy.

Energy Industry Warns Export Ban Could Backfire

The American Petroleum Institute, an oil lobby group, quickly contested the prospect of a U.S. diesel export ban when Trump initially appeared to back the idea last week.

API CEO Mike Sommers said in a statement that restricting U.S. energy exports would only compound the problem, exacerbating refining challenges and ultimately hurting consumers.

The answer is more supply and more flexibility, not new restrictions that risk making a difficult situation worse, Sommers said.

Commodity strategists at Morgan Stanley echoed those concerns, warning that while an export restriction would likely lower U.S. diesel prices initially, it could trigger adverse reactions downstream.

Not only would diesel prices be higher globally, but there could be a feedback loop to US gasoline prices as refinery runs adjust, strategists at Morgan Stanley said in a research note published Thursday.

Global Supply Crunch Worsens

The U.S. has become an important source of marginal diesel supply amid reduced flows from Russia and the Middle East. Conflicts involving the U.S. and Iran, as well as Russia and Ukraine, have disrupted vital oil and fuel trade routes.

Benedict George, head of European product pricing at Argus Media, said the U.S. has supplied about half of Europe's diesel imports over the last couple of months. A U.S. restriction would likely send European diesel prices and premiums against crude to a new unprecedented level.

Ukrainian attacks on Russian oil refineries have added a whole new layer to the global supply crunch, making diesel the biggest problem for the global oil system, George said.

Trump has previously urged Ukrainian President Volodymyr Zelenskyy to stop targeting Russian oil refineries, saying the attacks are hurting the world as fuel supply disruptions continue to prop up U.S. diesel prices.

What Happens Next?

Energy Secretary Chris Wright has said the White House is considering restrictions rather than an outright ban. Politico reported last week that the Trump administration was preparing a plan to ban diesel exports for 90 days.

George said the uncertainty is so extreme that some traders have simply given up trying to forecast the market.

One trader was saying to me recently that he doesn't bother trying to forecast now because it feels like a waste of effort. You have literally no idea what is going to happen, George said.

He noted that any U.S. restriction would likely be a short-term measure, lasting two or three months at most, but the Russia-Ukraine conflict and the semi-closure of the Strait of Hormuz remain unpredictable wild cards.

Will the Export Ban Happen?

Trump has previously indicated support for an export ban, saying earlier this month that a decision would be made quickly one way or another. Oil traders in Europe mostly doubt the U.S. will restrict diesel exports, given how challenging such a move would be for American oil companies.

For Iowa families and farmers watching prices climb, the decision cannot come soon enough. The question now is whether the White House will act, and whether such a move would actually provide relief or simply shift the pain elsewhere.

This article is based on reporting by CNBC.